Lazard Ltd (LAZ), Evercore Partners Inc. (EVR): Betting on Boutique Investment Banks

That said, most analysts stress that, on a positive side, Lazard asset management’s performance will remain strong thanks to the continued equity market appreciation. Besides, Lazard has built an extensive financial advisory backlog that should help support  this year’s final results. Thanks to its wonderful management and its ability to work on the weaknesses of its bigger competitors, I expect Lazard to continue gaining market share across all its business lines. Lazard Ltd (NYSE:LAZ) has achieved a perfect size that lets the company be small enough to be manageable but big enough to achieve high operating margins.

These three companies all seem to have great futures. While Greenhill is exploring a new “conflict-of-interest-free” business model (advising only), Evercore Partners Inc. (NYSE:EVR) and Lazard have the twin model combining asset management and advising. Naturally, the twin model produces higher ROE because the model requires leverage, which also makes it riskier.

My personal bet among the group is Lazard Ltd (NYSE:LAZ). The firm’s size and experience are just in the right spot. Besides, it’s cheaper. While Lazard, with its 2013 return on equity (ROE) of 35.8%, sells for 17.3x P/E, Evercore Partners Inc. (NYSE:EVR) and Greenhill, producing ROE of 16% and 15% respectively, sell for 18x P/E and 23.5x P/E. In my opinion, if you want to own an investment bank, go long Lazard.

The article Betting on Boutique Investment Banks originally appeared on Fool.com and is written by Federico Zaldua.

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